Brocade's Q1 revenue down annually but beats earnings targets anyway

Wrapping up one of the last big weeks of tech earnings season, Brocade reported first quarter earnings after the bell on Thursday.

The data and storage business reported a net income of $81 million, or 18 cents per share (statement).

Non-GAAP earnings were 24 cents per share on a revenue of $565 million, down four percent year-over-year but still up one percent quarter-over-quarter.

Wall Street was looking for earnings of 20 cents per share and revenue of $550.45 million.

Touting the better-than-expected results, CEO Lloyd Carney reflected on the quarter, both the highlights and misses, in prepared remarks:

Our performance was driven by the strength of our Storage Area Networking (SAN) business as customers continue to adopt Gen 5 Fibre Channel networks for their highly virtualized data centers and high-performance storage environments, including Solid State Disks (SSDs). While the overall IP Networking business declined year-over-year, we achieved our outlook for the quarter. This is a transformational year for Brocade and we remain committed to our mission to be the network provider of choice to the world’s data centers.

Here's a closer look at how Brocade's first quarter revenue broke down:

• Storage area network (SAN): $412 million, a decrease of one percent annually but up eight percent sequentially
• SAN business revenue grew sequentially across all product segments with Gen 5 Fibre Channel products accounting for approximately 71 percent of director and switch revenue in the quarter, up 42 percent annually
• IP Networking: $153 million, down 11 percent year-over-year and 15 percent quarter-over-quarter
• Roughly 59 percent IP Networking product revenue came from datacenters, up 48 percent annually

For the current quarter, Wall Street expects Brocade to deliver earnings of 19 cents per share and $540.91 million in revenue.

Brocade is expected to provide second quarter guidance during the quarterly shareholders conference call at 2:30PM PT/5:30PM ET on Thursday.

UPDATE: Noting that the fiscal year and the current quarter are both longer than usual, Brocade highlighted the potential financial impact, warning that SAN unit revenue would likely be down 10 to 13 percent sequentially while IP Networking should remain flat.

Overall, Brocade offered a Q2 revenue guidance range of $520 million to $540 million with earnings of 17 to 19 cents a share.

Chart via Brocade Investor Relations